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Calculating ROI (Return On Investment) for training

If you are trying to quantify the economic and other benefits of training, this free article by Derek Stockley may help.

How do you measure training success?

My training clients contact me because they have identified a gap in performance. Some aspect of individual or organisational performance needs to be improved.

They proceed with the training because they believe it will add value to their organisation. They believe the benefits gained will outweigh the economic cost.

The ease of measuring training success varies.

For example, a sales manager receives one-on-one presentation skills training just before making a major client presentation. During the training, the whole presentation is re-aligned and the manager receives personal coaching on public speaking and presentation skills. The manager delivers the presentation which is direct, comprehensive and to-the-point. The manager convinces the audience of the need to buy the service outlined. The manager is confident that the major contract will be won or lost on other factors, but not because of a poor sales presentation.

Other training is harder to measure.

I regularly discuss the Donald Kirkpatrick model of training evaluation with training participants.

• Reaction - how participants feel about the training event, often measured by 'happy' sheets. This often relates to the content - the subjects covered.
  
  
• Learning - whether or not the participants learnt new or different knowledge or skills.
  
  
• Behaviour - whether or not, as a result of their reaction to the training, and the learning gained, they changed their behaviour - their new knowledge, skills and/or attitude made a difference to their behaviour.
  
  
• Organisation impact - the effect on organisational functioning - better customer service, improved productivity, etc.
  
  

Some argue that there is a fifth level related to ROI (Return on Investment). I have always seen ROI as part of the fourth level.

It is also important that training is not only evaluated on the financial level. A good training event will also help morale and team spirit - intangibles that can turbocharge productivity and performance.

In the sales manager example above, the training evaluation showed:

• Reaction - a positive reaction demonstrated by direct comments as well as enthusiastic participation.
  
  
• Learning - acknowledgement of key learning points, demonstrated by actual changes to the sales presentation design.
  
  
• Behaviour - during and after the training, a more confident and polished public speaking skill was demonstrated.
  
  
• Organisation impact - the specific sales presentation went well, with a strong commitment to purchase a service costing over $500,000 AUD.
  
  

Training can make a difference.

Summary

Training should be evaluated for its economic and intangible benefits. Sometimes the economic benefits will be clear, sometimes there will be a positive reaction or feeling and sometimes the ROI (Return On Investment) will be clear.

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This article was last modified on 20 October 2005.